Thursday, February 3, 2011

NFC market moves from innovator to early adopter phase

LONDON, UK: The near field communication (NFC) market has moved from an ‘innovator’ to an ‘early adopter’ phase and from trial development to the first commercial roll out.

The key driver for the market is the wide adoption of the NFC solution in mobile phones, as without massive number of NFC-enabled mobile phones in use, the market will not be able to realise its immense potential. Frost & Sullivan anticipates that NFC-enabled mobile phones will reach 863 million units in 2015. At this time, NFC-enabled mobile phones will represent more than 53 percent of the overall market.

New analysis from Frost & Sullivan titled: NFC - When Will Be the Real Start? states that in 2015, NFC will clearly be the most-used solution for mobile payment.

Frost & Sullivan expects that the total payment value for NFC globally to reach € 111.19 billion in 2015, while the NFC payment value in the EU is expected to reach €41.87 billion. Frost & Sullivan forecasts a five-year CAGR of 118 percent between 2010 and 2015.

“There are two possible business models for the NFC market; the first one is based on a memory rental model where the NFC application will rent the memory space used by its application and the second is a pure rental model coupled with extra cost per use where the application will pay a cost per year with a given number of actions,” explains Frost & Sullivan global program director, Jean-Noël Georges.

“When this number of actions on the application such as update, patch, read and write is reached, extra costs are charged to the application provider.” Frost & Sullivan anticipates the second model to be the most applicable. The pure rental model will probably be the most widely used in future.

“Different secure elements for NFC methods have allowed different technology players in industries such as telecoms operators and electronic device manufacturers to establish their own payment infrastructure,” remarks Jean-Noël Georges. “This lack of harmonisation has been an obvious restraint for the NFC industry.”

For nearly a decade, the NFC solution has been facing political and commercial problems. Most industries involved in NFC trials did not want to share the substantial revenues generated by this solution. Illustrating this point was the commercial discussion between banks and network operators, neither of whom wanted to share revenues. At the beginning, each wanted to force the other to adopt their business model. At the end, after network operator acquisition of banks and financial company acquisition of network operators, they were forced to admit that cooperation was the best compromise.

The NFC market also has the potential to create revenues for the entire NFC ecosystem. Even if it seems that purely hardware - SIM card and NFC controller - revenues will decrease, the gain will still be really important.

However, most technology providers have been able to offer new services directly linked with NFC. Handset manufacturers, trusted service management system providers and marketing and commercial NFC service providers all stand to benefit.

“Many marketing companies are already involved in the NFC ecosystem,” concludes Jean-Noël Georges. “This is a good signal because, in the past, marketing companies were involved in new technology roll-outs only when the transition occurred from purely trials to first commercial deployments.”